A recent article published in the NY Times http://www.nytimes.com/2012/07/22/opinion/sunday/our-ridiculous-approach-to-retirement.html basically says that individuals are unable to manage their own finances, and the government should step into the fray to 'save the day' with a new government administered retirement plan. Social Security 2.0
I bring the article to your attention not because I agree with anything discussed (the author lost whatever credibility she might have had with the Unrepentant Capitalist when she espouses investments with a 'guaranteed rate of return') but because I think it's an excellent example of an all too common line of thinking that has led to government growth beyond its proper scope and has put our nation's finances in trouble. The problem is that many people have unrealistic expectations about the role the state should play in solving societal issues.
Articles and authors like this are enablers who give large chunks of our society permission to sit on their hands and do nothing. Worse, this kind of thinking causes people to rely on the government to take ownership for problems that should be the individual's responsibility. The mantra is "This problem is too tough for me" or "I can't handle it". We've allowed ourselves to become wimpy. I'm glad our self reliant forefathers didn't have that attitude or this country would never have been settled. It is this kind of thinking that has led to our current enormous scope of government that has has greatly contributed to our $15 trillion (and growing) deficit.
Let's make this simple. Leave beneath your means, avoid debt, save at least 10% of your income. If your employer offers a 401(k) matching plan, participate as much as you can. This advice is not complicated or new and goes back to old Testament days. Okay, maybe not the part about employer matching 401(k) plans, but for the most part, this is advice societies have known about for years.
Wondering what to do with your investment money, put it in index mutual funds (the Unrepentant Capitalist has discussed this topic in the posting Mutual Funds, Efficient Markets, and Mispricing from July 7, 2012.) If you're wondering how to spread your dollars between stock and bond funds, the long standing rule of thumb says you subtract your age from 100, and that's the percentage of your portfolio you should put in stocks and the rest goes to bonds. For example, if you're 40 you should put 60% of your portfolio in stocks and 40% in bonds. If you're 60, you should put 40% of your portfolio in stocks and 60% in bonds. In recent years, this rule of thumb has been updated given how long Americans are living these days. Financial planners are now saying the rule should be based on 110 or even 120 minus your age to get to the proper stock allocation. DISCLAIMER: the Unrepentant Capitalist is not a licensed financial planner, but I did stay at a Holiday Inn Express recently.
The author wants to make retirement planning look very complicated, and I'm sure you can find retirement planners who are happy to make this as complex as you want. This doesn't have to be difficult. More importantly, no one is going to care more about this than you.